Strata Reforms [NSW] Update 7: Building Structure Issues
In strata, it’s all about the building [as well as the Benjamins] ….
Even before the money, the strata building structure is the basis for almost every right, interest, entitlement, obligation, and liability in strata. So, the strata law provisions governing its preservation and alteration are important.
Strata title doesn’t exist without a building.
There must be a building to create a strata corporation, strata owners’ property [their cubic space] is defined by walls, floors, and ceilings, asset values depend on its preservation, and, most strata insurance applies on a whole-building basis.
Plus, the strata operational fundamentals apply based on the way [use, responsibilities, rights, payments, control, etc] the building is constructed and divided.
And, most of a strata corporation’s money goes towards the building in one way or another.
So, the parts of strata laws about the building are critical.
Introduction about strata building structure matters
NSW strata laws include a variety of provisions relating to building structure matters covering the following key things:
Common property maintenance, repair, and replacement [SSMA ss 106, & 115
Alterations by strata buildings and owners [SSMA ss 107-112, 142, 143, 144, & 152]
Other works on common property [SSMA ss 118, 119, 122, & 123]
Orders about works [SSAM ss 126-132]
Interference with common property [SSMA s 151]
The 2020 NSW Statutory Review Paper discusses decision-making issues at questions 102 to 107, 111 to 118, and 120 covering strata owners alterations, common property repair and maintenance responsibilities, and initial maintenance schedules, which I’ve reproduced at the end of the article.
General comments on strata building structure issues
The conceptual basis for strata titling land [the ground and building] into cubic spaces that are individually and collectively owned was very well thought through by its NSW inventors, Messrs Rath and Grimes in the late 1950s [I’ll write an article about that interesting chapter in strata history soon].
And, it’s stood the test of time very well for 60 years.
So, I believe we must respect and preserve these fundamentals whilst adapting them to deal with the changes in buildings, property ownership, the economy, and society that have occurred.
Unfortunately, some changes that have already been made in NSW haven’t done that and should, in my opinion, be reversed or changed.
Strata building structure issues [allocation between stakeholders, original defects, disrepair & long-term management, changes, liability, etc] since the building structure is fundamental to strata title existence and dealing with the building represent a significant proportion of day-to-day strata operations.
Where strata law reform is needed & my suggestions
I’ve identified 5 areas of strata building structure matters that should be addressed in these strata law reforms.
1. Lots vs Common Property [and stuff in between]
A perennial issue in strata building is delineating what is lot property and as a consequence what is common property. Once known this determines responsibilities between the strata owners and the strata building.
This delineation occurs via a combination of the strata plan and the deeming/defining provisions in the strata laws about boundary locations. Done carefully, it resolves virtually all such questions although it sometimes requires a physical inspection of the relevant part of the building.
But there are some more difficult features or mechanisms.
The first is common infrastructure [shared utilities and similar things] that are not shown on the strata plan and are located in lot cubic spaces but are common property. That’s because they are typically hidden and defined by words and use.
Secondly, when new but permanent structures are added to a strata building or a permanent structure is altered or relocated there can be issues about whether or not they are common property or belong to one or more strata owners. Property law concepts of fixtures probably apply to make most of them parts of the common property, but not always and the law is unsettled in this area.
There is a rarely used mechanism for a building alteration plan that can be registered to reflect the structures or changed structures on the strata plan. But, more typically the ownership of the structure/s is never formally addressed.
And, even when it’s done via a by-law, the structures may be loosely defined, ownership may not be expressly covered, and only ongoing responsibility is addressed. Other, lower-level consents are typically even less precise.
Finally, since the 2015 amendments, strata buildings have been able to adopt a prescribed common property memorandum under s 115 of the strata laws that can prescribe and modify responsibility for common property items [effectively allocating them to lot owners].
But, in my view, there are many problems with this memorandum, conceptually and in practice because:
there’s an internal inconsistency in s 115 where subsection (3) where it refers to ‘items that are not common property’ since the memorandum can only refer to common property,
where the memorandum prescribes the strata building is responsible for common property [more than half of the prescribed version] it’s just restating the existing law and position,
since by-laws can override the memorandum, the memorandum is wrong on its face in any strata schemes that have such by-laws and will mislead or confuse strata stakeholders who read it,
the memorandum ignores how strata building insurance operates to cover many lot owner fixtures for repair and/or replacement in some circumstances,
many of the things the memorandum prescribes are the responsibility of the lot owner are just restating existing law and position, and
some of the memorandum provisions allocating responsibility to lot owners are not well described, considered, or wrong in some cases.
My favourite illustration of the last problem is the memorandum provision that makes a lot owner responsible for ‘that part of a tree within the cubic space of a lot’; so that if there’s a large tree whose roots extend below or outside a lot courtyard and its branches and canopy extend above the courtyard’s upper boundary, some of the tree is the lot owners responsibility and some is the strata building’s responsibility.
Rather than trying to write simple universal rules for sometimes complex boundary and ownership situations or for that apply to all strata buildings when they are all uniquely built and configured, it’s much more important that strata buildings identify the common and lot property in the building, capture changes that are made to the building structures, clarify the ownership of the new or changed structures, identifies who assumes or has been allocated ongoing responsibility, and specifies the extent of that responsibility.
Another reason for having records of building structure changes or improvements [including inside apartments] is to ensure those structures are properly covered under strata building damage insurance.
So, I suggest that the strata laws abolish the common property memorandum.
So, I suggest that the strata laws require strata buildings to maintain a register of building alterations covering the changes, dates, ownership, responsibilities, etc [including noting disputed matters].
So, I suggest that the strata laws reinstate the obligation on owners to notify the strata building of improvements in their strata lot.
2. Shared use & allocation issues
Every strata owner is a co-owner of the common property with equal and unlimited rights to use all of it.
Those rights can only be restricted by property dealings [such as covenants, easements, etc] or strata by-laws. That’s why there’s a by-law prohibiting parking on common property otherwise everyone could park anywhere.
This isn’t usually an issue because most strata owners are reasonable and sensible and there’s often not much utility to many common property areas.
But, it does arise in 2 situations.
Firstly, it occurs where the strata building doesn’t want areas used at all or over certain periods [like the roof, plant rooms, pools, and gyms out of hours, etc]. Best practice in these situations is to make a by-law imposing the restriction and that’s an appropriate solution.
Secondly, it occurs where more than one strata owner wants to use the same common property or common property that is limited in dimension or capacity and those demands need to be balanced. Some examples I’ve seen include:
where there are less common property parking or storage areas than apartments,
where two café operators want to put tables and chairs in the same common area lobby,
where there aren’t enough incoming phone or data lines for the increased demands for connections, and
where multiple food outlets all want to connect to common exhaust ventilation systems that don’t have the capacity to handle the required air volumes.
The last scenario was the underlying problem in Lin’s case decided by the NSW Supreme Court in 2004 where, unfortunately, the strata building was ordered to create more mechanical ventilation capacity.
Typically, it’s a ‘first in best dressed’ situation where the first strata owner or owners to get permission to use the common area get it and everyone else misses out later when they need it or realise that it’s no longer available.
Plus the creation of permanent rights over common property under by-laws makes the problem permanent.
A better solution is a fair sharing or use policy for common property areas, facilities or services. This recognises the limited availability of that resource, that strata owner needs may vary and can change and that what was fair once may not be fair in the future.
So, any special rights to use common property conferred on strata owners should not be permanent [with reviews and no guarantee of renewal]. And, the strata building should consider whether, how much, and what kind of compensation should be received by the other strata owners who have lost or forgone the common property usage rights.
So, I suggest that the strata laws impose a sunset on approvals for the sole use of common property to ensure that it is not permanently lost to the other strata owners.
So, I suggest that where the use of limited capacity common property resources if allocated to one or more owners the strata laws provide a mechanism to revisit that allocation when other owners later also want to use those resources.
So, I suggest that if common property is allocated for permanent use by one or more lot owners [however done] the strata laws require compensation to be paid by the benefitted owners to the other owners [and not to the strata building] for their loss of property interests.
3. Repair, Maintenance, Replacement & Liability
Strata buildings have an unavoidable obligation to maintain, repair, and replace the common property and are liable for orders to do so and damages claims for not doing so.
It’s an important principle of strata title because, fundamentally, if the strata buildings is not intact then strata owners’ property titles and values are directly impacted.
However, a few exceptions have been permitted where:
strata buildings decide by three quarter majority votes not provided it doesn’t impact safety, structures, or appearance, and
there is legal action about common property damage, strata buildings can defer maintenance, repair, and replacement until that’s finished provided it doesn’t impact safety, structures, or appearance.
But, because of the codification of a strata building’s liability for damages to strata owners and others for not maintaining, repairing, or replacing common property under s 106(5) of the strata laws and court and tribunal decisions ordering damages, I believe we need a qualifier to those obligations to recognise the relative impact of delays.
It’s obvious that faults in common property cannot be dealt with immediately on awareness. So, there will always be delays for good reasons [like proper investigation, sourcing repairers and co-ordinating the works, etc] and sometimes for bad reasons [avoidance, lack of funds, incompetence or negligence, perversity, etc]. But, strata building liability for delays is not circumscribed by the circumstances and reasons when it should be relevant.
Since the 2015 strata law changes, developers are obliged to provide an initial maintenance schedule under s 115 covering matters and documents specified in reg 29 of the strata laws.
But, as convenient as that obligation sounds, it’s both inadequate as a way of promoting or ensuring better strata building structure maintenance and its real purpose is largely misunderstood.
Firstly, if developer compliance in providing initial maintenance schedules matches how often and well they provide all the other first general meeting handover documents required under s 16 and reg 6 of the strata laws, then they’ll be pretty rare things.
Secondly, assuming an initial maintenance schedule is provided, strata buildings are not required to comply with it. So, it sounds like the 10-year capital works fund plan that strata buildings get and need but can ignore.
But, finally and more importantly, since s 115(4) permits an initial maintenance schedule to be considered in defect or damages proceedings, it’s effectively a defence tool to be used by developers and builders against strata buildings in defect litigation. Using it to argue that since the strata building didn’t follow the maintenance schedule precisely or at all, the defect is due to maintenance and reducing or avoiding liability.
I just can’t see how this extra process serves any useful purpose for most strata stakeholders.
So, I suggest that the strata laws Introduce a qualifier to the strict duty to maintain, repair, and replace common property that allows strata building a reasonable time to effect the necessary works given the circumstances applying at the time.
So I suggest that the strata laws abolish initial maintenance schedules.
4. Owners Works
Strata owners want to improve their apartments, shops, and offices with minor and more major works. Sometimes they may also want to incorporate common property structure changes.
Over time the controls on strata owner works have evolved into a few tiers of controls and permission structures. But that haphazard evolution means that the mechanisms have different criteria, leave gaps between different kinds of works, sometimes overlap, and can be confusing to apply for strata stakeholders.
At present in NSW the following different regimes could apply to strata owners work in their strata properties and in and to common property.
Standard by-law 5 permits some minor works without notice to the strata building but imposing automatic conditions.
Standard by-law 5 prohibits work that ‘damages’ common property without majority vote approval from either the strata committee or at an owners’ meeting.
Cosmetic work can be undertaken under s 109 without approval but very basic default conditions apply
Minor renovations can be undertaken under s 110 with notice and majority vote approval at an owners’ meeting but they exclude some typical parts of apartment renovation works and apart from very basic rules [same as cosmetic works] conditions are optional.
More extensive works and things where the benefits/obligations need to pass to future lot owners can be approved under common property rights by-laws by three-quarter majority votes and must specify whether the strata corporation or strata owner has ongoing obligations.
Works to add to or alter common property can be approved under s 108 by three quarter majority votes but conditions are optional [including in relation to ongoing obligations].
Strata buildings can give strata owners licences to use common property under s 112 by three quarter majority votes but conditions are optional [including in relation to ongoing obligations].
Strata buildings can lease parts of the common property to strata owners by three quarter majority votes under s 33 of the strata development laws.
Strata buildings can transfer ownership of parts of the common property to strata owners under s 13 of the strata development laws.
And, soon sustainability infrastructure will have its own separate approval structure requiring a majority vote at a general meeting when the new Strata Schemes Management Amendment (Sustainability Infrastructure) Bill 2021 takes effect [see my article A Few Strata Law Quickies in NSW].
As you can see there are too many layers of controls and approval regimes but, arguably, at the same time, some typical works [like bathroom renovations, solar panel installations, air conditioning systems] spread across multiple approval regimes with complications for strata owners wanting to do the work and strata building that need to consider approving them.
And, in some cases, strata buildings have superimposed their own internal approval regimes for some kinds of works [like the standardised air conditioner installations] under by-laws which are arguably ineffective since they are inconsistent with the strata laws [see s 136(2) of the strata laws] where that kind of work approval is covered in the existing strata laws.
What’s needed is a better graduated and more flexible system of controls on strata owners’ works and approvals. One where the approval requirements increase according to the magnitude and impact of the works but where strata buildings can set the thresholds for different kinds of works to suit their preferences.
Maybe the threshold can be mapped along axes based on the following criteria which can collectively determine the approval threshold and conditions:
Is the existing structure common property or lot property
Is common property being occupied/used
Is it permanent or temporary
Is it a replacement/change to an existing or new item
Are utilities [power, water, HVAC, telecoms/data, etc] involved
Structural vs non-structural impacts
Visibility or appearance impacts
How big [or small] are the works
Ongoing maintenance repair and replacement needs
Other impacts on other strata owners or residents
Another issue concerning strata owners’ works is the ability to give or get retrospective approval for previously undertaken work by strata owners or their predecessors. At present, there is some legal doubt about the ability to give retrospective approval under some regimes. That should be clarified.
Finally, I’d also like to see the reintroduction of a default position like the one that used to exist for common property rights by-laws about ongoing maintenance obligations for all strata owners works so that in default of special conditions in approvals then:
if the works are on or to common property they are the strata buildings responsibility, and
if the works are on or to common property they are strata owners responsibility.
In that way, the default responsible party has an incentive to make sure the position is clear.
So, I suggest that the strata laws are restructured to provide for a clearer regime for owners works approvals that escalate thresholds progressively based on a set of criteria that are wider than the works themselves.
So, I suggest that the strata laws permit strata buildings to modify the approval thresholds.
about the
So, I suggest that the strata laws permit retrospective approvals but allowing strata buildings to consider [reasonably] the circumstances giving rise to the need for retrospective approval.
So, I suggest that the strata laws impose default obligations for works onto the owner of the property where they are performed unless changed or negatived by the approval conditions
5. BIM & 3D mapping
Finally, it’s time that we use modern technology to identify what is lot and common property and how it’s changed rather than relying on 2D strata plans, statutory interpretation rules, and words and basic drawings in works approvals.
Why not use Building Information Modeling [BIM] and 3D mapping technologies to create 3D digital maps of strata buildings that identify all the different structures, boundaries between lots and common property, common infrastructures, and other important features and then overlay later alterations and works when made.
That provides a much better tool for strata stakeholders that increases in value over time and avoids difficult and often repeating disputes about ownership and responsibility.
Here’s a basic exploration of BIM and 3D mapping from Wikipedia.
Let’s take these strata building structures into the current century and so they’re future-proofed.
So, I suggest that the strata laws provide that BIM details for the building are provided by the developer if available.
So, I suggest that the strata laws permit strata buildings to 3D map their buildings as part of their functions.
Mar 01, 2021
Francesco …
NSW STRATA LAW REFORM DISCUSSION PAPER QUESTIONS ABOUT BUILDING STRUCTURE MATTERS
102. Owners can make changes to common property in connection with their lots if they have authorisation. Either the owner or owners corporation could be responsible for ongoing maintenance. Should the Act outline that a decision needs to be made about who is responsible for ongoing maintenance before any approvals are given to change common property?
103. When making changes to common property such as renovations, is it easy to understand what approvals are needed and when? If no, please tell us why not.
104. Are any changes needed to the types of work that are considered cosmetic work or minor renovations? Please tell us why.
105. Should committees be automatically able to make decisions on minor renovations rather than those decisions being delegated by resolution? Please tell us why.
106. Should a lot owner always be told the reasons why their request for work or renovations was not approved? If yes, when should the reasons be provided?
107. Do you have any other suggestions on how to improve approval of changes to common property?
111. How effectively has the law been in ensuring owners corporations comply with their duty to properly maintain and repair common property?
112. Do you have any concerns with the statutory duty to maintain and repair common property? How could it be improved?
113. Is the two-year time limit imposed on making a claim for damages for breaching the duty appropriate? If not, what would be an appropriate length of time?
114. Is it appropriate for the owners corporation to remove parts of the common property from their duty where it is inappropriate to maintain or repair that part of the property? Can you advise of any situations where this has been misused?
115. Is it appropriate that owners corporations can defer compliance with the statutory duty in situations where they are taking action against an owner for damage to the property? Are you aware of any situations where it has been misused?
116. Has the duty impacted owners corporations’ and owners’ pursuit of claims for building defects, or arranging of rectification of building defects? If yes, how could this be addressed?
117. The developer must prepare an initial maintenance schedule for the strata scheme’s common property to be considered at the first AGM. Do you agree with this? Are the requirements clear? Are any changes needed?
118. Have you experienced any difficulty obtaining the initial maintenance schedule, or information about estimates and levies determined during the initial period, from an original owner/developer?
120. Do you have any suggestions for improving the initial maintenance schedule?